Standing Committee A

[Mr. Roger Gale in the Chair]

National Lottery Bill

Roger Gale: Good afternoon, ladies and gentlemen. I should have made it plain at the outset, and did not, that if I give permission once for Members to remove their jackets that permission is granted while I am in the chair for the entire sitting. I cannot speak for Mr. Cook.

Clause 5 - Fees

Hugo Swire: I beg to move amendment No. 23, in clause 5, page 3, line 29, at end insert—
'(2A) The level of fee prescribed shall be the Secretary of State's estimate of the cost to the Secretary of State and the National Lottery Commission of performing their duties under this Act.'. 
Clause 5 deals with the annual fee payable by the licence holder. The amendment would say exactly what level of fee should be paid by the operator. I am grateful to the Minister for telling me in a written answer the level of fee previously paid into the Consolidated Fund. 
I make what I hope is a helpful suggestion; the Minister should place in the Bill a precise definition of what the fee should be so as to avoid confusion. That would guard against the possibility of fee being used as a revenue-raising operation, and would reassure those bidding for the operator licence. It would also ensure that a less fair-minded successor to the Minister could not rack up the licence fee, rather as the Chancellor did with the 3G mobile phone network. It is a straightforward amendment, seeking clarification and it invites the Minister to define precisely what it is to which he is alluding.

Richard Caborn: The holders of operating licences under clause 5 and gaming licences under clause 6 pay fees relating to the cost of issuing or renewing licences. That has proved to be a somewhat inflexible arrangement, as it requires frequent changes to be made through secondary legislation in order to set fees. It risks becoming a barrier to innovation, particularly in the development of new games, and it takes time to amend the regulations.
Clause 5 therefore provides a simplified arrangement, more akin to the arrangements for the application and annual continuation fees payable by holders of licences issued by the Gambling Commission under the Gambling Act 2005. It is our intention to set the fees at levels that are broadly revenue-neutral, allowing for inflation, over the lifetime of the licence. The fees will reflect the commission's expenses in exercising its functions of granting licences, considering new games and  monitoring the licences, which is important, rather than reflecting its expenses in issuing the licence as at present. 
Amendment No. 23 would allow us to go further and set the fee at a level to reflect all the commission's and my Department's costs in performing their functions under national lottery legislation. We do not think it appropriate for the fee to be set at such a high level nor for such costs to be met by the annual fee, as suggested by the amendment. Costs should continue to be met out of the national lottery distribution fund, as should part of the commission's costs. I hope that the hon. Gentleman will withdraw the amendment.

Hugo Swire: I am grateful to the Minister. He clearly is not going to mention any figures; I appreciate that it would be difficult for him do so. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn. 
Clause 5 ordered to stand part of the Bill.

Clause 6 - Licensing structure

Question proposed, That the clause stand part of the Bill.

Hugo Swire: Clause 6 makes some alterations to the licensing structure. An order made under subsection (1) may
''make transitional or incidental provision . . . bring all or part of Schedule 1 into force . . . make different provision for different purposes''
and so forth. On the face of it, it seems straightforward. 
I am sure, Mr. Gale, that you will correct me if I go wide of the mark, but that raises the question of the licence and the licensing structure surrounding it. This morning, under a different Chairman, we alluded to the granting of the licence, what form the structure would take and how the licence would be arrived at. 
It was interesting to read—in The Mail on Sunday, I think—an article on Camelot, how the Government are now proceeding with the licence, the licensing structure and the disappointment of some of the contenders, who had hoped that the rules would be changed to give some of the potential new entrants financial assistance with the multimillion pound cost of bidding. I do not think that that has happened. 
There is the question of Camelot's inbuilt advantage; its instant access to information on lottery playing trends when its competitors have to start from scratch. The issue is about whether the licensing structure favours any one applicant and whether the Minister will sell it as a piece of internal housekeeping once the licence has been granted. 
At this stage, anything that prevents potential bidders from bidding—whether that be the costs involved, the duration of the licence or the whole licensing structure set out in clause 6—should be discouraged. We remember the last lottery selection process; it was described by Richard Branson, who we learn is not going to bid again, as a sham. I hope that  we are not left with a position in which the licence application and structure are to the liking of one bidder, but a deterrent to the others. Camelot won the last licence bid in 2000. This morning, the hon. Member for Bath (Mr. Foster) was keen to say how well the lottery was doing—

Roger Gale: Order. I shall offer the hon. Gentleman some guidance. Strictly speaking, this debate is about an order providing for the introduction of schedule 1. The hon. Gentleman is entitled to oppose that if he wishes, but he is beginning to move into a debate on schedule 1. I do not mind, but he will not be able to do that twice. He can either have the debate now, or when we arrive at schedule 1.

Hugo Swire: I was coming to the end of my remarks, Mr. Gale, and do not seek to detain anyone. My concluding remark impacts on this issue; it is about what I said this morning about the slightly less optimistic sales of lottery tickets. I was corrected on that by the hon. Member for Bath and the Minister.
However, when Camelot was granted the licence in 2000, it said that it would raise up to £15 billion for good causes. Five years into the seven-year licence, it has delivered only £7 billion, so is expected to fall almost £5 billion short by the end of its contract in 2008. That is the salutary lesson; before we all pat ourselves on the back and talk about the tremendous success of Camelot and the last round of bidding, the facts need to be examined more closely. That is why the schedule and licensing structure need to be considered again carefully; to encourage, on a level playing field, as many potential bidders as possible.

Adam Afriyie: Is my hon. Friend concerned, as I am, about clause 6(3)(c):
''An order under subsection (1) . . . may make different provision for different purposes''?
That seems incredibly broad. However, as I am fairly new to the House, perhaps I am misreading it.

Hugo Swire: It is fairly broad, and perhaps the Minister will explain that to the Committee. Any clause that uses the formula
''may make different provision for different purposes''
is pretty open, and, on the face of it, would allow the Government to do pretty well what they wanted. I have tested your patience as much as I dare, Mr. Gale, and shall conclude my remarks.

Andrew Selous: I want to clarify a small point. I should probably know the answer, not being an entirely new Member, and I ask the Committee for its indulgence, but clause 6(3)(e) states that an order under subsection (1)
''shall be subject to annulment in pursuance of a resolution of either House of Parliament.''
Does that mean that the House of Lords could, on its own, make a resolution, separate from the will of the House of Commons?

Richard Caborn: Yes.
We have had wide consultation on the licence, as hon. Members acknowledged. We are, in the clause, attempting to avoid what happened previously, when effectively there was one bidder. We want the National  Lottery Commission to have as many tools as possible to do what all members of the Committee would want; to get the best for the good causes out of a well run and effective lottery, and to ensure that no particular bidder, whether the incumbent or any other, is favoured. We have, with some difficulty, tried to bring that about, in a transparent way, through consultation on our November 2004 national lottery licensing and regulation review decision document. Clause 6 and schedule 1 are part of that approach. 
The Government's clear and firm presumption is that there will be a single licence to run the national lottery, awarded by competition. Even though we want that to happen, we cannot guarantee it, so we have decided that in the extreme and, indeed, unwelcome circumstance of an unsuccessful competition, and mindful of the concern expressed by the Public Accounts Committee in its report on the second licensing competition, we should have a fall-back position. 
The clause therefore would provide the Secretary of State with the reserve powers to introduce the new licensing structure set out, as you said, Mr. Gale, in schedule 1. That would enable more than one licence to be issued, to promote lotteries forming part of the national lottery. We believe that that would offer the greatest alternative scope and the combination of innovation and efficiency that the lottery would require to remain successful. 
If the Secretary of State did not need to take such action, she would make an order, but only after consulting the National Lottery Commission. The statutory instrument could bring in schedule 1 in whole or in part, and would be subject to a negative resolution procedure.

Adam Afriyie: I may, as I said before, be a bit naïve, as I am quite new to the House, but will the Minister explain how clause 6(3) is restrained with respect to the power to
''make different provision for different purposes''?
I suspect that there is a mechanism, but how is the provision restrained from giving a Secretary of State licence to do whatever they like, in any way they like?

Richard Caborn: But it is not the Secretary of State who will do it; the National Lottery Commission will conduct the negotiations and report back to the Secretary of State. We are trying to create conditions under which the National Lottery Commission, from as large a field as possible, can extract what is, in its view, the best possible outcome for good causes in an efficiently-run lottery, probably the best run lottery in the world. That is the object of the exercise. We believe that clause 6 and schedule 1 will, as happened with previous provisions, give the National Lottery Commission that maximum negotiating capability.
That comes off the back of two past experiences with lottery licensing which were not particularly good; I accept that. There has also been wide consultation, in terms of the review decision document on national lottery licensing and regulation. We have distilled all that. We believe that  we are giving the National Lottery Commission a good framework. Then it will have to report back to us. It will not be the Secretary of State who carries out the negotiations; it will be the National Lottery Commission.

Adam Afriyie: I understand the Minister's answer, but I was being fairly specific. Subsection (3)(c) concerns me. It states:
''may make different provision for different purposes''.
I just wonder what the restraint is. Could provision be made for allocating money to something that was not a good a cause? Where is the restraint in paragraph (c)? It seems very open. The other provisions are constrained by other parts of the legislation, but I cannot see how paragraph (c) is constrained in any way.

Richard Caborn: The decision will have to be justified against the criteria. The acid test is whether good causes get the maximum amount of money. Everyone will be looking at that. This will not take place in isolation. We hope that there will be a series of bidders. The expressions of interest to date look quite healthy. There will be a serious competition. My personal view is that we will not be in a position where we will have to depart from having one licence. I hope that that is the case because that will be the best way to extract the maximum that we can. We have all the conditions, including the 15-year maximum licence. There will be one criterion that will be used to make a judgment; what is best for good causes? The National Lottery Commission will have to report back. Like every other non-departmental public body, it has restraints on it. However, it also has enough flexibility to maximise the take.

Andrew Turner: The Minister is trying to be helpful, and is succeeding. None the less, my hon. Friend the Member for Windsor (Adam Afriyie) has raised an important point because the Minister appears to be explaining that there are things that are contained in neither the clause nor the schedule that do in fact restrain, or which he thinks will restrain, the actions of the Secretary of State under subsection (1). However, there is nothing written down, until Hansard is produced as a result of today's debate, that encapsulates the objective of raising the maximum amount for good causes. Is that the case?

Richard Caborn: I do not quite follow the hon. Gentleman's logic. We have a system under which the Secretary of State is responsible, in the end, to Parliament. She has delegated to the National Lottery Commission, within certain parameters, the responsibility to negotiate a new licence for the lottery. What we are debating in relation to clause 6 and schedule 1 relates to the conditions under which it will carry out that negotiation. The endgame is to extract, from, we hope, a good field of applicants, the best outcome for the good causes. We are not talking about a constraint on the Secretary of State. It is the National Lottery Commission that will carry out the  negotiation and report back to the Secretary of State, and, by that means, to Parliament.
The provisions give powers and flexibility to enable the National Lottery Commission, first, not to get into the situation in which it was previously; secondly, to have a structure that will engage many bidders; and, thirdly, to ensure that we can extract the maximum amount from those bidders for good causes. That is the sole object and therefore the constraint. I do not follow the rationale of the point that was being made. I might be being a bit thick about that. That is the object and I believe that it is contained in the Bill. That is why I want the clause and schedule 1 to stand part of the Bill.

Andrew Turner: So, the Minister is saying that, on the application of the National Lottery Commission, the Secretary of State would consider making an order and would then make such an order, subject to parliamentary annulment? Is he saying that it is not that the Secretary of State who is taking the initiative, but the National Lottery Commission?
Mr. Caborn indicated assent.

Andrew Turner: I have got it.

Richard Caborn: I have nothing to add.
Question put and agreed to. 
Clause 6 ordered to stand part of the Bill.

Schedule 1 - National lottery licensing

Question proposed, That this schedule be the First schedule to the Bill.

Don Foster: Welcome back, Mr. Gale. You will be pleased to note that we are making rather more rapid progress than we did the last time you occupied the Chair.
Schedule 1 deals with national lottery licensing. It makes several changes to the National Lottery Act etc. 1993, including in respect of licensing persons to promote lotteries. I do not disagree with any particular aspect of the schedule, but I suggest to the Minister that the changes he wants to make to the 1993 Act do not go far enough. 
I do not deny that I am slightly confused by some of the paperwork before us. The Minister has helpfully provided us with a copy of the now infamous Keeling document, which incorporates all the proposed changes to the 1993 Act, as amended by later legislation. I have struggled to make some sense of how schedule 1 has been incorporated in that document. On the assumption that I have got it wrong and the document is absolutely correct, no change is planned to section 6(5) of the 1993 Act, in particular paragraph (a). According to the Keeling document, after the Bill is passed, section 6(4) of that Act will state: 
''The Commission shall not grant such a licence''—
to promote lotteries— 
''unless it is satisfied that the applicant is a fit and proper person to promote lotteries under the licence.''
Subsection (4) is very clear, stating that the commission shall not grant a licence unless it is satisfied that the person is fit and proper. However, immediately afterwards, subsection (5) states: 
''In determining whether to grant such a licence, the Commission may consider— 
(a) whether any person who appears to it to be likely to manage the business or any part of the business of promoting lotteries under the licence is a fit and proper and person to do so''.
The first of two successive subsections in section 6 states that the commission must ensure that a person is fit and proper, but the second says that it may consider whether the person is fit and proper. I am totally confused about what it is meant to do and why both provisions are necessary. I would be grateful for an explanation from the Minister.

Richard Caborn: I shall try to explain. The hon. Gentleman has omitted to say that, before the changes we propose, the 1993 Act states:
''The Commission shall not grant such a licence unless it is satisfied that the applicant is a fit and proper body to promote lotteries under the licence.''
The Bill will delete ''body'' and insert ''person''. We had a debate this morning about the definition of ''person'', and I told the hon. Gentleman that I shall write to him because the legal interpretation of that term is not as clear to the layperson as we want. We shall go to the lawyers and get the proper interpretation of whether the term includes the corporate body as well as persons. We were informed that ''persons'' includes the corporate body. 
Section 6(5) of the 1993 Act states: 
''In determining whether to grant such a licence, the Commission may consider— 
(a) whether any person who appears to it to be likely to manage the business or any part of the business of promoting lotteries under the licence is a fit and proper person to do so''.
That is clear in the sense that the term ''body'' has been deleted and ''person'' inserted. I shall give the explanation of ''persons'', as we discussed this morning. I do not see any conflict at all.

Don Foster: I shall read my copy again—I apologise for putting it on the record twice and to anybody who may be given the task of recording what we are saying. I accept the change from ''body'' to ''person'', so I am incorporating that in what I say. Section 6(4) clearly states:
''The Commission shall not grant such a licence unless it is satisfied that the applicant is a fit and proper person to promote lotteries under the licence.''
Subsection (5) states: 
''In determining whether to grant such a licence, the Commission may consider— 
(a) whether any person who appears to it to be likely to manage the business or any part of the business of promoting lotteries under the licence is a fit and proper and person to do so''.
It seems to be saying the same thing, with the exception that one says that the person must do it and in the other it says that they may. Surely it has to be one or the other. I assume that it has to be that they will do it.

Richard Caborn: There are two different persons involved. Section 6(4) applies to the licensee while  section 6(5)(a) applies to managers of the business and to key employees or directors.

Don Foster: That brings us back to the debate that we had this morning about the change to ''person''. The Minister is telling us that a person, who could be a body, gets the licence while a person, who is not a body, will be the manager of the operation. We come back to the issue of which of those ''persons'' needs a personal licence. Can the Minister tell us whether the manager will be required to have a personal licence? A yes or no answer would be helpful.

Richard Caborn: I am not going to give a yes or no answer. I think that subsection (5)(a) defines that person. Let us go back to section 6(4):
''The Commission shall not grant such a licence unless it is satisfied that the applicant is a fit and proper person to promote lotteries under the licence'',
while subsection (5) reads: 
''In determining whether to grant such a licence, the Commission may consider— 
(a) whether any person who appears to it to be likely to manage the business or any part of the business of promoting lotteries under the licence is a fit and proper and person to do so''.
We are using ''person'' to encompass two different categories of people. The first is, as we said, the person and the body corporate. This is what the lawyers say. I acknowledge what members of the Committee are saying; it is a little confusing. We will try to give an explanation in layperson's language and I have given a commitment to do that. In the second case, ''person'' is given definition by the reference to the fact that it means the person who will 
''manage the business or any part of the business of promoting lotteries under the licence''.
It also stresses the importance of their being 
''a fit and proper person to do so''.
That is clear to me. Following the discussion on the body corporate that we had this morning, the change from ''body'' to ''person'' in section 6(4) needs clarification. I will communicate that clarification to the Committee by letter or by a different form of explanation.

Roger Gale: Order. Before we proceed any further, I have to point out that the past five or six minutes of the debate have, strictly speaking, been out of order. I let it run because I think that it is important that matters are placed on the record and members have the opportunity to ask questions. However, we are debating a document that is not before the Committee, which is improper. The Keeling schedule is not, strictly speaking, before the Committee. We are actually debating schedule 1, and I fear that I must now ask the Committee to return to it.

Don Foster: I may be in some difficulty. I do not want to try your patience, Mr. Gale, and you can tell me whether I am in order. I believe that it is legitimate to raise this matter because schedule 1 changes the 1993 Act and, in particular, makes small changes to section 6 of that Act, which deals with the licensing of persons to promote lotteries. 
I am arguing that the amendments made by the Bill do not go far enough and that a further change should have been incorporated in the schedule. I am asking the Minister to help me with that. If I have understood him correctly, when determining the licence the commission will look at the person—which might be a body corporate—who will be the licence holder and is required to determine whether that person is fit and proper. It is, however, possible that the body or the person who has the licence will leave the task of delivering promotion of the lottery to some other person, who is a manager. I fail to understand why it is deemed appropriate to insist that there be a check on whether the person who receives the licence is fit and proper, but there is no similar requirement to insist on a check to ensure that the manager is a fit and proper person. If the licence is to be run by someone as a manager, I am sure that we would all be much happier if we knew that there was a requirement on the commission to check that the person who will do all the work and conduct the day-to-day operation is fit and proper to do so. The word ''may'' should be changed to ''shall''.

Hugo Swire: I think I understand where the hon. Gentleman is coming from, but is not the point that whereas the person or body to whom the licence is granted will be the licence holder for the duration of the licence period—10 or 15 years—the manager might change, and that whereas one can deal with the expectation of one, it is difficult to see how to deal with the expectation of the other?

Don Foster: I understand where the hon. Gentleman is coming from. However, if I were giving a contract to someone to do work for me—perhaps a builder or a plumber—I would want to be confident that the person to whom I let that contract would not employ to carry out the work people who I was not confident were fit and proper to do the job. I would seek some assurances and would certainly want to check that the staff carrying out the work were fit and proper to do the job. I am merely saying that the same should apply to the lottery.
The Minister, more than most members of the Committee, will be aware of why I pursue the matter with such vigour. We had similar debates about other aspects of gambling outwith lotteries during the passage of the Gambling Act 2005, when matters of great concern were raised about family arcades and so on. One person may own a family arcade but what matters in ensuring that the laws of the land are upheld, young people are protected and so on is that the people who manage that arcade are fit and proper to do the job. The Minister will be aware that we have debated the issue in the past.

Adam Afriyie: Again, I apologise to the Committee if I am being naive. I have scanned through the papers and I wonder whether the hon. Gentleman agrees that the schedule reveals major changes to the 1993 Act. The schedule refers to three subsections, but section 6 of the 1993 Act has six subsections. I know that the  marked-up document is not part of our proceedings but that is definitely not reflected in that document, which is why I have only just spotted it. I hope that the Minister will respond.

Don Foster: I alluded in my opening remarks to a similar confusion, although I did not express it as clearly as the hon. Gentleman. As you rightly pointed out, Mr. Gale, the Keeling document is not before us, so it is not to be commented on; but if the Minister were considering making available to members of the Committee any subsequent paperwork, it would be helpful if he checked that it reflects the changes in schedule 1.

Richard Caborn: Your guidance is, of course, correct, Mr. Gale. The Keeling document does not include schedule 1, because it is an amendment to the 1993 Act. We are in danger of misleading one another. This is the last time we issue a Keeling document, I can assure you, Mr. Gale. It was issued to try to be helpful—as guidance. As you rightly say, Mr. Gale, we are debating some of the amendments to section 6 of the 1993 Act. Schedule 1 is an amendment to the 1993 Act and it will, I hope, become part of the new National Lottery Act. Schedule 1 has to be brought into play, and that is where one can easily be misled by the Keeling document.

Don Foster: I shall leave it there. I have raised the issue. I still believe that someone who is going to manage a licence ought to have been checked out and declared fit and proper. I hope that we get the opportunity—perhaps by my moving an amendment—to discuss the issue at a later stage of the Bill.
Question put and agreed to. 
Schedule 1 agreed to.

Roger Gale: Before we proceed, the Minister has made reference to the Keeling document and he has endeavoured to be helpful. There would have been nothing wrong with that document being placed on the Table, with the permission of the Chair; it could then have been included in debate. By seeking to be helpful but surreptitiously so, the Minister has fallen into the trap of not making the document available of the Clerk and the Chairman, which means that it is not technically admissible. Should the Minister ever want to do that again, he should do it properly.

Don Foster: On a point of order, Mr. Gale. Is there a mechanism in order to pass a message to the Minister saying that everyone on the Opposition Benches in the Committee has found the document to which you refer, Mr. Gale, to be extraordinarily helpful? We hope that nothing said by any of us will prevent the Minister from wishing in the future to do something similar.

Roger Gale: I know of no such mechanism.
Further consideration adjourned.—[Claire Ward.] 
Adjourned accordingly at twenty-two minutes to Five o'clock till Thursday 3 November at half-past Nine o'clock.